Now I know what you’re thinking. Here’s another article on corporate dentistry and why I should embrace current trends and look for a financial sponsor or (DPO) Dental Practice Partnership. Well, you might be surprised to find that it is actually the exact opposite. True, financial sponsors and private equity have had quite the run in the last couple of decades, but why? It’s because private practice left the door wide open. You can do the math, and we have. There is virtually no scenario where selling your practice to private equity is financially advantageous to the seller. If you are someone who has sold to private equity, this is not a criticism and I’m not suggesting it was a bad idea. It very well may have been the right decision for you, but for reasons other than what your financial benefit would have been if you had maintained ownership. Maybe it was work life balance, health, executive burnout, or a variety of non-financial reasons.
So how did private practice leave the door open for financial sponsors and private equity? A lack of executive talent. Effective executives have a unique skillset that organization seek out and leverage to inspire growth and sustainable results. This is why Tim Cook, Sundar Pichai, or Andy Jassy were recruited to talk the helm at Apple, Google, and Amazon. Not because, and I repeat, not because they had impeccable technical skillset. This is precisely why your clinical skills are not simply sufficient to ensure you will build a successful dental enterprise. Don’t get me wrong, you can make a good living with great technical skills, but you can make a fortune with great executive skills. The best executives do three things really. The anticipate changes in the industry landscape and consumer values, they inspire people with a worthy vision, and they keep moving forward.
Private practices were operating 6-8 hours per day, 3-4 days per week, were not embracing technology or ways to make treatment more affordable for patients. You can break all of these down into three distinct patient values: Convenience, affordability, and comfort. Patients want to be schedule appointment when they are meet the strict demands of a working parents or traveling professional’s schedule. They want to know that their discretionary income is being stretched as far as it possibly go when it comes to dental services. Lastly, they want to be in an environment where they trust the people caring for them and their family and know that they are receiving the highest quality care. It wasn’t too hard to see that these needs weren’t being met, and that by doing so, would allow an organization to be attractive to the market. This is why DSO’s are growing 20% to 22% per year while private practices are growing 2% to 4%. Now if you’re ok with 2% to 4% than keep doing what you’re doing. However, the stock market has returned 8% in every historical 50-year period without the headache of business ownership. If you got into business ownership for the same reasons as most entrepreneurs, like autonomy, and financial abundance, then you better start sharpening your executive saw.
The great news is much of the legwork has been done for you. We already know what dental consumers want and research is conducted every year to help us stay on top of any changes. They want convenience, affordability, and comfort. We know how to meet those needs. Multi-specialty practices, itinerant specialists, online scheduling and billing, insurance participation, dental savings plans, same day dentistry, laser dentistry, customer services and internal marketing to name a few. Now this doesn’t mean you have to be all things to all people. You can certainly target an isolated segment of your market; you simply need to be more strategic in identifying what those three values look like to that market. For example, if you want to target a more affluent patient, then your strategy may not include insurance participation but better place an emphasis on internal marketing and quality. And remember, patients don’t measure quality the same way you do as a clinician. In fact, studies show that people now trust technology more than they do people.
If you can appreciate the value in embracing current trends in consumer values, then you can appreciate how these trends are changing the business model of dentistry, and ultimately the industry. Multiple locations provide greater access to resources so that you can capitalize on economies of scale and meet these values while maintaining and even enhancing profitability. It broadens your market for patients, provides greater reach for talent, gives you leverage to negotiate more favorable insurance reimbursements and supply costs, and gives you access to more opportunities like merger acquisition. Keep in mind, it is not private equity, technology manufacturers, supply companies, or business professionals that are driving these changes. They are simply trying to do the same things you should be doing as business owner, change with the consumer. Some just do it a little better than others.